It
is a great pleasure to respond to Ron Montaperto's request to return to a
subject that occupied me early in my career as a China analyst and has never
since been far from my thoughts.My
very first job involved analyzing China's just concluded national science
conference of 1978; even then, no one knew whether my report should go to the
technology analysts or the China analysts.Six years later, in 1984, someone who later occupied that same office
found my report at the bottom of a stack of documents, covered in dust, with no
evidence that it had ever gone anywhere.Not
much has changed in the United States on that score, although certainly a great
deal has changed in China.

The
importance of the topic that Ron assigned to me and James Mulvenon cannot be
overstated, for three reasons.First,
it has been seriously understudied, in part because it falls between
organizational and disciplinary lines.Although
the instructions for preparation of this essay specifically stated that authors
should not discuss what is and what is not known, it is imperative to
state at the outset that the literature in this area is somewhere in between
weak and non-existent.At best,
insights about China’s defense related research and technology have to be
inferred from documents such as the Cox Report or annual reports to the Congress
about China’s military capability.The
focus is on tangible and measurable output, such as new hardware.Second, the raw material for serious analysis is out there for the taking
if someone wants to spend the time and effort to get it.This was certainly not true 15 or even 10 or even 5 years ago.Third, understanding the defense industrial base is one way
to look intelligently into the future rather than wait for new hardware and new
capabilities to emerge and make themselves manifest.

What
are the key questions and how can they be approached?The answer falls into two categories—the first is issue-oriented and
second involves questions of methodology.

ISSUES

A.
Organizations and People

It
goes without saying that it helps to understand how the military R&D
bureaucracy works in China.Which
are the key organizations?How are
their responsibilities defined?Where
do they get their funding?Who
reports to whom?Among the more
obvious applications for this knowledge are: validation of informationin end use certificates required for certain technology transfers,
insights into Chinese weapon sales and dual use technology sales, and
identification of the relevant expertise when arranging bilateral discussions on
defense technology.This is the
“grunt work” that could previously only be done by the intelligence
community, and even there, it was the low glamour end of the China business.It meant reading piles and piles of cables, memcons, and other raw
material and extracting minute data points.

Today,
however, the important and up date information comes from entirely different
sources: journalists, businesspeople, scholars, NGOs.As before, the relevant data points are embedded in the context of
business negotiations, technical discussions, and so forth.It is very rare for someone in China to give present a top-down
organizational overview for its own sake.A
sensible approach would be to find the people who are already acquiring the
relevant data points, and figure out how to tap into and synthesize their
knowledge base.The internet and the wide range of software applications that
are available today at little or no cost should make this much easier to do than
in the past, and will make it possible to continually update the information.The Chinese internet itself has a growing number of websites that could
be mined for data.

Some
of the glaring holes that could probably be at least partially filled by
aggressive outreach to the types of individuals mentioned above include:

What
exactly is the difference between the old COSTIND and the new COSTIND—who
is in charge of what?

What
are the activities of the CAEP institutes now that the testing program is in
a moratorium?

To
what extent, and in what way, are defense related institutes drawing on
innovation and new technology in the civilian sector?What kinds of organizational ties exist between the civilian and
defense sectors of the economy?

What
is the relationship of university research to the military industries?

Who
are the prime movers in fields relevant to the future of China's defense
industries?Who has access to
resources and who is able to carry the day when there are contentious
negotiations?

B.Where are the Pockets of Excellence?

For
at least a decade, analysts have been characterizing Chinese technology as a sea
of mediocrity with islands of excellence.To
date, however, there is very little precision as to what is on those islands.Analysts have pointed to impressive engineering feats, which have
resulted in incremental improvements to existing systems.However, hardware is not the same thing as know-how and theoretical
understanding of important disciplines.A
one-time upgrade does not reflect the depth of the knowledge base; it might
reflect nothing more than a lucky break.Twenty
years after the inception of the Open Door Policy, China has begun to develop a
reservoir of indigenous scientific talent that could be a continuing source of
revolutionary, rather than evolutionary, change.It is critical to understand where this talent is, how it
compares with the state of the art elsewhere, and what the potential
implications are.

To
complete this work successfully, it is essential that social scientists team
with hard scientists.Most China
analysts cannot tell one missile guidance system from another, and papers from
Chinese journals on shock physics or opto-electronic materials can sound
impressive without actually being impressive to a trained scientist.In fact, it will require an experienced scientist to even
identify which sub-fields are worthy of in-depth investigation.Solid state physics is probably more important than cosmology, for
example, from a weapons development perspective, and genetic engineering more
relevant than cellular biology.Software
engineering and telecommunications are clearly relevant, but it would require an
expert to decide where to look within these large fields.

Once
some fields have been selected, information is plentiful.There are large numbers of scientific papers, trade journals, promotional
material from exhibitions, reports of scientific and engineering exchanges, and
so forth.The list of potential
sources is long.The
Chinese-American scientific community itself has a large number of professional
organizations throughout the country.The
raw material is there if someone is willing to dig for it and analyze it
intelligently.

C.
Budget

The
preoccupation of China analysts with figuring out how much China spends on
defense appears to me to be an old-think relic of the Cold War era, when various
parts of the US government spent many hours and many dollars trying to figure
out Soviet defense expenditures.At
the end of the day, there were huge disagreements, many of which rage on to this
day, despite the fact that the question is largely obsolete.This just goes to show that it in Russian studies, as in
China studies, it's not only hard to predict the future, it's hard to predict
the past.

There are five core problems with recent attempts to estimate the budget.

First,
a number of the assumptions that are the foundation for the estimates are
inherently troublesome.One example
is the assumption that the amount ofresearch
and development spending for a given service is reflected in the budget of the
corresponding industrial ministry.In
other words, if the budget for China Aerospace Corporation is larger than the
budget for China State Shipbuilding Corporation, that means that the PLA air
force gets more money than the PLA navy.Second,
not surprisingly, there is a huge range in predictions, and a factor of 10 or 20
separates different estimates.Third, the granularity of the results is poor.Analysts are able to make guesses for the major categories of
activity—research and development, military pay, and so forth, perhaps even by
service, but they can achieve nothing like the detail that would really be
required for this to be a useful tool.Fourth,
the statistics are all somehow tied to Chinese government numbers, which are
more and more questionable every day.Who in China today believes the government figures on GNP, for example?If those numbers cannot be trusted, estimating the defense budget is a
futile activity.Finally, even if
the resulting estimate were reliable, it isn't clear what it would tell us.Would it be useful as a comparison with Russian defense spending, or US
defense spending, or Indian defense spending?Probably none of the above.

Lacking
the proper disciplinary training for this effort, and loath to suggest that it
be scrapped altogether, here are three suggestions as to how to proceed.

First,
it should be possible to find out some of the "building block" costs
and track those, paying careful attention to the reasons that they might be
changingover time. One example
would be annual pay for different military ranks.Another one would be imports of military hardware, whose prices can at
least be estimated with some confidence.Dramatic changes in some of these discrete areas might well be revealing.

Second,
it might be possible to use the entree that the business community has into the
civilian side of key industrial ministries to make better assumptions about
spending in the military piece of those industries.This is a piece of the suggestion embedded in Section D below, and it
might prove to be a futile exercise.However
it seems to be worth at least an initial inquiry.

Third,
devote time and energy to establishing reasonable indicators, and then stay with
them over time.The real potential
value of this exercise is to compare China of 1995 with China of 2000 and to do
this, it is essential to keep the units of measure consistent.

D.
Industrial Modernization in the Civilian Sector

One
of the shortfalls in the budget estimate exercise is that a budget number,
whether for a service arm or a defense industrial research institute, represents
only the "input" and is meaningless unless one also understands the
black box that constitutes the process of spending the money before it is
translated in to "outcome."

Analysts
have been struggling with this one for many years.The main reason that the budget number is meaningless, at least for the
defense industries, is that there is no way to know how efficiently the money is
invested or how it is distributed.This
is a process question.What has
changed over the past 20 years is that the civilian side of Chinese industry has
been forced to open its doors, at least partially, to foreigners.Scientists and businesspeople have been able to gain some visibility into
how state owned enterprises in the industrial sector work -- or, more likely,
don't work.Casual conversation
with these people suggests that they have data points and partial information
about how the accounting is done, what the salary levels are, how equipment is
paid for and maintained, who has to approve different levels of purchases, how
much money comes in horizontally from other organizations outside the formal
chain of command, how much business the factory or institute can do "off
the books," and so forth.If
these data points have been collected and systematically analyzed specifically
for civilian state-owned enterprises, it is worth using them as a basis for
assumptions about what is going on in the defense sector.What is needed is a study comparable in depth and sophistication to
Armann and Cooper’s The Technological Level of Soviet Industry.A study of this caliber might already exist.If not, it will be necessary to first examine what has been happening on
the civilian side of the SOEs and then reaching judgments about which trends
also pertain to the defense sector.Whereas
it is no doubt true that the defense side of the big industrial ministries
differ in important respects from the civilian side, it is also true that the
line between military and civilian industry in China appears to be getting
fuzzier.That is to say, the fuzziness of the line is getting clearer,
since in the past there were many of us who suspected it was always fuzzy, but
it wasn't clear that it was fuzzy.So
to speak!Without having paid
careful attention to the new literature on Chinese industrial modernization, my
suspicion is that there remains much more work to be done in this area.

Another
even more compelling reason exists to track developments in China's civilian
technology.The Cold War model for
understanding China's defense industries was linear and one-dimensional.Analysts tended to assume that the leadership established a military
strategy, set certain development objectives, invested to support that strategy,
and waited for results to emerge from the pipeline or until there was a Russian
fire sale that could provide a quick fix.Suppose,
however, that the "junkyard" approach is the operative one?In this scenario, the military leadership might establish
requirements and then look to see what is already shelf ready in the civilian
sector to support those requirements.Or,
it is possible that the existence of a particular technology in the civilian
sector will itself give birth to a military requirement that did not previously
exist.Examples of these can
be found in other economies, and there is every reason to believe that this
could happen in China, if it hasn't already.

METHODOLOGICAL

A.Historical Case Studies

Evaluations
of China's defense industrial base are prey to the same polarization that
plagues evaluations of China's overall military capability.Either the Chinese are ten feet tall or they are the gang
that can't shoot straight.The
reason that both assessments stand up to scrutiny is that one camp (ten feet
tall) is looking at inputs, and another (gang that can't shoot straight) is
looking at outputs. No one can speak with confidence about how long it takes an
input to become an output, or which investments will go down a black hole.Once again, this is a process question.One way to begin to understand the black box that transforms inputs into
outputs is to focus on historical cases.

One obvious suggestion is China's tactical ballistic missile program.This is now recognized as an island of excellence for the Chinese defense
industry, and one that has resulted, because of the deployment of the missiles,
in a major source of tension between the Untied States and China.What is known about how the capability evolved?What were the constituent technologies that China had to master?Were they imported, reverse engineered, indigenously developed?Was technology transferred from the commercial sector?Were there subsidies to help the program along?Although authors have filled many pages bemoaning the existence of these
missiles and decrying the Chinese for having deployed them, I don't know of any
studies that have systematically analyzed how they came to be.Is it true, for example, that the Chinese began to look seriously at the
potential role of short range ballistic missiles in their own defense doctrine
only after the United States applied pressure on China to curtail missile exports?If so, this
history contains some important lessons for the future.

B.
Internet

The
content of the internet has not been adequately mined for what it might say
about China's defense industry.The
Chinese search engines are quite powerful, and there is much more access than
one might expect.Many Chinese home
pages are quite sophisticated, and information is added to these pages very
frequently.Virtually any of the
topics mentioned above would benefit from carefully targeted internet searches
at regular intervals.There are now
sophisticated software tools that will perform automatic searches and email the
results, and there is even software that will perform rudimentary translations.

C.
Field Work

Field
work, site visits, and in-depth interviews used to be the exciting part of a
career in China studies.These have
now been replaced by the conference circuit, much to the detriment of the field.The important answers are down in the details.Although China is by no means transparent, and access remains a problem,
the ability of someone who speaks Chinese to establish contacts, maintain
relationships, and find information has vastly increased over what it was a
decade or two ago.Field work is
often tedious, the conditions are rarely ideal, and the subject of the inquiry
will probably have to be indirectly related to the real question.However, much more could be done, particularly in the institutes of the
Chinese Academy of Sciences, some of which are known to be involved in military
programs, and in the key universities.

D.
Nontraditional Indicators

It
is by now clear that the US analytical community lacks the right vocabulary to
describe an emerging world power that is neither ally nor enemy, neither an
immediate threat to be contained nor a third world military to be ignored.For these reasons, it is not surprising that much analysis still focuses
on traditional, Cold War era measures of sophistication in military related
research and technology.Given the
growing integration of military and civilian research in China, and the speed of
innovation in the commercial sector, it makes sense to re-examine these measures
and consider adding new ones.For
example, it might make more sense to understand the telecommunications
infrastructure that is being installed throughout China than the modifications
being made to Chinese tanks and APCs.The
way in which the military is absorbing and applying information technology might
be more important than the exact specifications of a new weapon system.A multi-disciplinary team of experts, especially if it
includes analysts who have studied the military industries of countries other
than the United States and Russia, could be tasked to compile a post-Cold War
agenda.
CONCLUSION

Chinese
officials are transparent about their desire to remain ambiguous.For this reason, analysis of the defense industrial base -- and, for that
matter, the defense budget -- will never be easy.At the same time, the opening of Chinese industry to the West, together
with the growing integration of military and civilian research and technology,
provides opportunities to do a much better job.The comments above are simply a starting point from which it might be
possible to rejuvenate this area of research, and bring it up to date.